Starbucks reports cooling quarterly growth and pares outlook

NEW YORK (Reuters) - Starbucks Corp (SBUX.O) forecast slower growth for the current fiscal year on Thursday as boutique coffee chains and fast-food retailers won business in the United States and other established markets and the bloom came off once-booming China.

FILE PHOTO: A Starbucks store is seen inside the Tom Bradley terminal at LAX airport in Los Angeles, California, U.S. on October 27, 2015. REUTERS/Lucy Nicholson/File Photo

Wall Street had been braced for a disappointing quarter from the ubiquitous coffee brand, and its shares were relatively unchanged in after-market trading.

Seattle-based Starbucks last month warned of lower quarterly sales growth and announced plans to close about 150 U.S. cafes in the next fiscal year, triple the typical number of closures, as it seeks to enter under-served markets in the U.S. South and Midwest.

But investors saw bright spots in the results, as Starbucks, the world’s biggest coffee retailer, reported revenue rose to a record high in its fiscal third quarter. The company also pledged a $10 billion increase in its share buyback and dividend commitment, to $25 billion through fiscal year 2020.

Starbucks said its same-store sales rose just 1 percent globally and in its U.S. cafes in its third quarter ended July 1. Same-store sales in China slipped 2 percent amid fierce competition and stricter regulations on delivery services.

“While acknowledging a disappointing Q3, I want to be clear that we have 100 percent confidence in our growth strategy and the sustainability of the leadership position we have built in the market,” Chief Executive Officer Kevin Johnson said in the company’s quarterly earnings call.

Starbucks blamed a combination of cannibalization of its own stores and hiccups in its China delivery program for much of the slowdown in the country.

In the year-ago quarter, Starbucks’ same-store sales grew by 5 percent in the United States and Americas and 4 percent globally. The sales dip in China is an even steeper departure from the 7 percent growth rate reported in last year’s quarter.

The company said it now expects full-year same-store sales growth to be “just below” its 3 percent to 5 percent targeted range, and sees fourth-quarter growth at the lower end of its 3 percent to 5 percent range.

Starbucks’ report comes exactly one month after Howard Schultz, the brand’s elder statesman and former chief executive, stepped down as executive chairman, in a move that stoked investor concerns on how the company would evolve after nearly four decades of Schultz’s near-constant presence.